From the stock market to the traditional FD, there are multiple investmentoptions available to individuals in India. But then, choosing the one that’s right for you is where the trouble begins. This is especially true if you are just getting started on your investment journey.
In such a case, how do you start investing as a beginner? Here’s a quick beginner’s guide that can help you out.
1. Determine your risk appetite and tolerance
Firstly, before you go ahead with your investments, it is advisable to spend a bit of time trying to find out your level of risk tolerance. This is a very important step that can shape the way you invest. If you’re unsure about your risk appetite, you can enlist the help of a few free online risk tolerance calculators or questionnaires.
You will most likely be one of three kinds of investors —
● The Conservative Investor
Conservative investors have low risk appetites and tolerances and usually tend to gravitate towards safe investment options like FDs.
● The Moderate Investor
Moderate investors, as the name itself suggests, have moderate levels of risk appetites and tolerances and usually tend to invest in a mix of both safe and risky investment options.
● The Aggressive Investor
Aggressive investors have a high risk taking ability and tend to gravitate towards highly risky options that have the potential to offer significant, inflation beating returns.
2. Decide on the amount of investment
Once you’ve determined your risk tolerance, the next step is to find out just how much you can and are willing to invest. Considering the fact that you’re a beginner, it is advisable to first draw up a budget. This can give you some much-needed insight into your expenses.
It can even enable you to reduce some non-essential costs. Once you’ve accounted for all your non-discretionary expenses, the remaining income should ideally be invested by you in the investment options that are right for you.
3. Pick your investment options
Here’s where the major work starts. Picking the right investment avenues is the most important step in your investment journey. When you’re setting out to determine the kind of investment option to put your money in, make sure to take your budget and your risk tolerance into account.
For instance, if you’re a conservative investor whose budget permits you to invest a lump sum amount, you can choose to park it in an FD that offers attractive interest rates. Alternatively, if you’re a more moderate investor whose budget permits you to only invest small amounts each month, you could consider investing in the stock market through an SIP and simultaneously start a Recurring Deposit (RD) account.
4. Choose the right platform
Once you’ve picked the investment options for your portfolio, you need to choose the right platform to invest in. Contrary to popular opinion, not all platforms offer the same kind of returns or levy the same charges.
In the case of mutual funds, for instance, the charges associated with the fund can vary from one fund house to another. Similarly, in the case of FDs, the rate of interest on offer also varies depending on the bank or NBFC that you opt for. On Bajaj MARKETS, for example, you can invest in FDs with interest rates up to 7.45%. This is higher than what most banks today offer.
As you can see, it is crucial to opt for the right platform since it can help you maximise your returns significantly.
Now that you know how to invest as a beginner, you can go ahead and get started right away. That said, irrespective of what your risk tolerance is, it is a good idea to have fixed deposit investments in your portfolio.
They’re considerably safer, provide guaranteed attractive returns, and don’t require constant monitoring. That’s not all. The earlier you start investing in FDs, the better your chances are at getting higher returns in the long-run thanks to the power of compounding.